What kinds of projects does the 21st Century Fund (‘Fund’) support?
In part, this question is addressed by the name of this State Fund: Indiana 21st Century Research and Technology Fund. In creating this Fund the General Assembly emphasized the role of scientific research and technology development in economic development. Since its creation in 1999, the Fund’s Boards have described the importance of the transfer of new technologies created in the State’s academic sector into commercial activity. Thus, during its first 5 years, the Fund emphasized the establishment of partnerships between the academic and commercial sectors. In addition to transferring technologies between sectors, such partnerships created an environment of cooperation among academic institutions and commercial sector actors.
Now, within the Indiana Economic Development Corporation, the Fund has taken a nearer-term view of the technology commercialization process. Beyond simply having the goal of commercializing a technology in the future, successful projects must now have near-term specific commercialization and jobs growth goals. A brilliant technology without clear commercialization ends, or commercial activities involving well-established technologies, will not likely win awards from the Fund.
The Fund’s ‘Request for Applications’, in its first paragraph, indicates that proposals should involve: ‘technology-based commercialization activities encompassing science/technology creation, innovation, and transfer intended to have commercial impacts’. In this context, ‘technology-based activities’ involve creation of new technologies and their implementation in prototypes/processes. It is implicit that such new technologies should have the potential to induce important changes in the broader commercial activities of the State. Simply implementing an existing technology does not necessarily involve the innovation and creative elements required for Fund support.
Such distinctions have been most difficult to implement in the software arena. While the creation of unique new software, providing capabilities not previously available, is indeed of interest to the Fund, such software development must present intrinsic challenges and technological (architectural, algorithmic, etc.) risks. Thus, programming activities, involving known software languages and methods, do not qualify for Fund support, no matter how innovative and important the eventual use of the final software product may be. These standard programming activities are clearly part of normal business activities; something the Fund explicitly does not support.
The Fund supports the proof-of-principal or validation of new technologies. This is important because it is only when a technology is demonstrated in practice that the normal capital markets will participate in its further commercial development. By providing this early/seed type of support, the Fund is effectively increasing in Indiana the number of attractive angel and venture capital investments.
What is a Technology-based Company?
This is defined in the Request for Applications: ‘A technology-based company is involved in transferring advanced technology into products, developing technologies with the near-term intention of creating products, or using new or advanced technologies in its design, development, and/or manufacturing of products.’
The emphasis, again, is clearly on creating or manipulating new technology in such a manner that commercial activity, and jobs creation, ensues. Transferring and developing technologies involves something fundamentally new. ‘Using new or advanced technologies in its design, development, and/or manufacturing of products’ indicates the use of newly developed or recently proven technologies as a means to substantially improve design, development, or manufacturing processes. For example, new advances in laser-assisted machining will have important implications for how new material structures are designed and manufactured. Or, new types of software may make possible activities that had been previously impossible or ineffective. In all of these cases the clear emphasis is on new and advanced science/technology and its intrinsic further development or utilization in new applications.
While innovative use of existing technologies will be to a company’s economic benefit, and may certainly lead to new jobs creation, this will not in general win Fund support. The reason for the Fund’s emphases is that from the point of view of the State the greatest benefits flow from developing new nationally competitive science/technology capabilities. As these enter the mainstream of commercial activities, Indiana companies will gain and sustain important competitive advantages.
How strong is the emphasis on commercial results, and jobs creation?
This is now a very significant driver of Fund award activities. Not only must the technology development plan be highly innovative and well-reasoned, but also the intended commercial development of that technology must be convincing. It must be clear that if all project activities go well, significant near- and far-term hiring will take place in Indiana. Thus, the nature of the business development plan will strongly influence the likelihood of an award action by the Fund. Discovery of a wonderful new drug, which is then licensed out-of-state, may create wealth in Indiana, but may have limited jobs creation impacts. The Fund and IEDC will carefully weigh both the ‘upside’ commercial scale and jobs effects of every project under consideration.
The current RFA describes the basic aspects a proposal should cover. Two of these are: ‘Estimate time to commercial impact’ and ‘Estimate job creation vs. time’. These are not idle requests for information. It is an applicant’s job to convincingly describe their commercial development plans in a manner answering these two questions.
The IEDC Board, which must recommend all awards from the Fund, thoroughly discusses each project’s likely commercial and jobs impacts.
Must I have an Academic Sector Partner?
No. While the academic sector can contribute importantly to a technology development project, it is not essential that you involve an academic laboratory if you can carry out the work entirely within the commercial sector. The Fund recognizes the importance of intensifying academic-commercial sector interactions, and such interactions are seen as a plus, but their absence will not inhibit an award. Company-company alliances are another effective means for bringing important technology development capabilities to a project.
If you utilize academic sector partners, your case for commercial impact is strengthened if a subcontract is utilized through which the commercial sector partner manages the research/development context of the project, as well as the finances.
How much Technical Detail do you require?
The level of technical detail will to some extent depend on what you are proposing to do; however, the most frequent failure in our technical review derives from reviewer comments such as: ‘not enough detail’; ‘important aspects of the project are not described’; ‘how this will be done is not described’; etc. Perhaps the best advice in this regard is to say: “imagine that you are writing to convince someone like yourself that the project has significant merit. What would you want to know?” In Fund technical review, you are addressing experts. You are not selling your idea to a lay audience or to a group of ‘generalists’. If you do not provide the detail necessary to win positive comments by persons who know your field, you will not likely win an award from the Fund. On the other hand, it is also important to note that it is possible to seriously and concisely describe a complex project without providing tedious protocol-like details, which any expert would implicitly expect you to undertake.
Another way to think of the issue of proposal detail, is from the point of view of clarity. You must organize your thoughts logically and express them forcefully and clearly. Your proposal should open with clear statements describing what you intend to do and why. This will set the context for the remainder of the discussion, and will prevent our reviewers from ‘guessing’ what your objective is going to be.
What is the Time-Frame of Review?
Generally, from the time we begin review of a proposal to action by the IEDC/IEDC Board about three months will have passed. If the project fails during technical review, you will hear in from one to four weeks, in general. But, we have limited ability to ‘force’ reviewers to respond. This can lead to prolonged waits, particularly if we feel that a particular reviewer’s comments are essential to our decision-making process.
In tandem with technical review, the IEDC undertakes an intensive exploration of the business development/jobs creation/Indiana benefits aspects of the project in preparation for IEDC Board discussion and action. This frequently leads to questions for applicants or for involvement of additional reviewers, often in this case involving members of the targeted ‘user community’ or ‘market’.
Do I Need to Include a Business Plan?
It is essential that you do. As the review expands from technical issues to business development issues, the presence of a business plan is important. The existence of the specifics of such a plan is also an important indicator of your commercialization focus.
In general, the Business Plan contains insufficient technical detail to take the place of a separate ‘technical proposal’. However, it is OK to create a combined Technical and Business Plan document.
How are Award Agreements developed?
Award agreements define the respective responsibilities of the IEDC/21 Fund and the awardee. They define expectations related to the execution of the project, and provide flexible guidelines allowing for the dynamic nature of technology development and commercialization activities. These aspects are common to most projects. In addition, there are required State of Indiana stipulations. The current RFA describes most award terms.
Awards may contain unique conditions, which are defined during discussion between the awardee and the IEDC/21 Fund. Almost all awards include a requirement for repayment if your business moves outside of Indiana during a specified time period.
What is the Purpose of Initial Discussions with Fund Staff?
Before you spend valuable time developing a proposal to the Fund, it is essential to determine that your intended project will be a good fit to the Fund’s objectives. This is most simply determined either through a discussion with Fund staff or by submitting a focused ‘white paper’. Furthermore, since Fund staff has managed the review of well over 800 proposals, they are in a good position to anticipate review issues and suggest improvements of proposal drafts. The net result of such interactions with Fund staff is optimization of the use of your proposal development time, and minimizing the possibility of your being declined as a result of matters that could have been anticipated.
Do You Have a Format for Budgets?
No. Again, clarity is the essence. It is important to relate and justify the budget in terms of technology development goals, and the impacts of those technical milestones on the development of your commercial objectives. Items of equipment, and essential personnel should be justified specifically. Overhead costs cannot be paid by the Fund. Our enabling legislation specifies that the Fund expects companies and other institutions involved in projects to share in project costs. It is important that you characterize past expenses leading the project to its current stage, and expenses involved in the execution of the proposed activities that will be paid by the Fund and by the awardee(s). Show how you would like Funds to be provided (this has typically been quarterly). You should tie funding to technical milestones as far as possible.
Project requests have ranged from about $40,000 to $5,000,000. Assuming a logical project plan, you should ask for support that is appropriate to the execution of that plan. The Fund will push back significantly at and above the $2,000,000 level. The funds for a project are set-aside at the time of award, and do not ‘revert’. Thus, you should ask for a project period consistent with what you are attempting to do. However, bear in mind the relatively near-term nature of many of the Fund’s objectives. If you request a 5 year period, questions will be asked about the nature of your commercial impact, why it will develop over such a prolonged time period, and how certain you can be of the technology and market, etc. so far into the future. You should bear in mind such trade-offs when considering the structure of your proposal, particularly the technology development trajectory.
A secure web site is available to our applicants for submission of proposal drafts and the final version of the proposal. Access information will be provided following the initial discussion of your project with the 21 Fund staff.
How is confidentiality protected?
We understand that intellectual property is the foundation upon which most technology-based companies are built. The 21 Fund’s enabling legislation provides for the confidentiality of proposal materials and communications with applicants and reviewers. The staff of the Indiana 21st Century Fund does not sign individual confidentiality/non-disclosure agreements with our applicants. During proposal review, we have our reviewers sign agreements with the 21 Fund covering non-disclosure and conflicts of interest. We believe our process adequately accommodates applicant confidentiality concerns. Ultimately an applicant has to reveal technical details to 21 Fund staff and reviewers. Since its inception in 1999, the 21 Fund has carried out thousands of reviews, and there has never been any suspicion raised about the confidentiality of our review process.